The financial year 2024-25 is nearing its end, and if you haven’t yet planned your tax-saving investments, you still have time until March 31, 2025. Under the old income tax regime, taxpayers can claim deductions under various sections of the Income Tax Act to lower their tax liabilities. However, under the new tax regime, only a few tax deductions are available.
One of the most widely used sections for tax-saving is Section 80C, which allows a maximum deduction of ₹1.5 lakh on specific investments and expenses. Let’s explore the details of this section and how you can benefit from it.
What Is Section 80C?
Under the old tax regime, individual taxpayers and Hindu Undivided Families (HUFs) can claim a tax deduction of up to ₹1.5 lakh on eligible investments and expenses under Section 80C.
Eligible Investments Under Section 80C
Here are the key financial instruments and expenses that qualify for deductions:
- Life Insurance Premiums – Premiums paid for life insurance policies.
- Equity-Linked Savings Scheme (ELSS) – Investment in tax-saving mutual funds.
- Employees’ Provident Fund (EPF) Contribution – Employee’s share of EPF deposits.
- Voluntary Provident Fund (VPF) Contribution – Additional deposits in the EPF account.
- LIC’s Annuity Plans – Contributions to annuity plans by LIC or other insurers.
- National Pension System (NPS) – Deposits made under NPS for retirement planning.
- Public Provident Fund (PPF) – Investments in PPF accounts.
- Tax-Saver Fixed Deposits (FDs) – Five-year fixed deposits in banks.
- Sukanya Samriddhi Yojana – Deposits made for a girl child's future under this scheme.
- Senior Citizen Savings Scheme (SCSS) – Investment in a scheme for senior citizens.
- National Savings Certificate (NSC) – Investment in NSC issued by the government.
- ULIPs (Unit Linked Insurance Plans) – Insurance cum investment plans.
- Children’s Tuition Fees – Payment of tuition fees for up to two children.
- NABARD Bonds – Subscription to specific bonds issued by NABARD.
- Repayment of Home Loan Principal – Principal repayment of a home loan.
Understanding Related Sections: 80CCC and 80CCD
Apart from Section 80C, two other sections contribute to tax deductions related to pension and retirement planning:
Section 80CCC
- This section provides tax benefits for investments in annuity plans by LIC or other insurance companies.
- Pension received from such plans is taxable, and any withdrawal or surrender amount also comes under taxable income.
Section 80CCD
This section covers contributions to pension schemes like the National Pension System (NPS) and is further divided into three parts:
1. Section 80CCD (1)
- Allows tax deduction on deposits made in pension accounts under the Central Government Pension Scheme.
- Salaried employees can claim up to 10% of their salary, with a maximum deduction of ₹1.5 lakh.
- The total deduction under Sections 80C, 80CCC, and 80CCD (1) cannot exceed ₹1.5 lakh.
2. Section 80CCD (1B)
- Offers an additional deduction of ₹50,000 for voluntary contributions to NPS.
- Up to 60% of the maturity amount from NPS (received as a lump sum) is tax-free, but monthly annuity income is taxable.
3. Section 80CCD (2)
- Provides tax benefits for the employer’s contribution to an employee’s NPS account.
- The deduction is 10% of the salary.
- Under the new tax regime (effective April 1, 2020), employees can continue to claim tax benefits for employer contributions under this section.
Final Thoughts
For taxpayers opting for the old income tax regime, Section 80C remains one of the most beneficial ways to reduce taxable income. Proper investment planning before March 31, 2025, can help maximize deductions and reduce tax liability significantly.
However, if you choose the new tax regime, most of these deductions (except employer contributions to NPS) won’t be applicable. Therefore, evaluate your tax-saving options carefully and choose the right investment strategy based on your financial goals.
Key Takeaways
✔ Claim up to ₹1.5 lakh deduction under Section 80C for investments in PPF, EPF, ELSS, FDs, and other tax-saving instruments.
✔ Additional ₹50,000 deduction is available under Section 80CCD (1B) for NPS investments.
✔ Employer’s NPS contribution qualifies for deduction under Section 80CCD (2).
✔ The total deduction under Sections 80C, 80CCC, and 80CCD (1) is capped at ₹1.5 lakh.
✔ Plan tax-saving investments before March 31, 2025, to claim benefits for the financial year 2024-25.
For optimal tax planning, consult a financial expert and select the best investment options suited to your needs.
